Unemployment benefits

Unemployment benefits are government payments to eligible people who have lost work. Programs commonly base eligibility and payment amounts on prior earnings and require recipients to seek work.

Unemployment insurance: A social insurance program that replaces part of workers’ earnings during periods of involuntary unemployment. Many unemployment benefits are paid through insurance programs financed by payroll contributions or taxes.
Unemployment rate: The percentage of the labor force that is without a job, available for work, and actively seeking employment. Rising unemployment can increase claims and strain benefit programs.
Means-tested benefits: Public benefits restricted according to a recipient’s income, assets, or household circumstances. Unlike earnings-based insurance, these benefits chiefly assess financial need.
Consumption smoothing: The practice of maintaining relatively stable consumption despite fluctuations in income over time. Payments help unemployed households avoid abrupt drops in spending after earnings stop.
Unemployment insurance in the United States: The federal-state unemployment insurance system established under the Social Security Act of 1935. The 1935 law created the framework behind modern U.S. unemployment benefits.
Eligibility for unemployment benefits: The legal conditions a person must meet to receive unemployment payments. Eligibility rules determine whether job loss, work history, and availability for work qualify someone.
Recession: A broad decline in economic activity lasting long enough to affect production, employment, and income. Recessions raise job losses and often prompt extensions or expansions of benefits.
Universal basic income: A policy proposal for regular cash payments to everyone in a population without a work or income test. It contrasts with unemployment benefits’ conditional eligibility and job-search requirements.
Moral hazard: A change in behavior caused when protection from a risk reduces the cost of taking that risk. Critics examine whether income replacement reduces the urgency of accepting work.
Social Security Act of 1935: A United States federal law that established major social insurance and public assistance programs during the Great Depression. Its passage established federal support for state unemployment insurance systems.

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